According to a report by Kyodo News on Friday, requests for Japan's budget for the 2027 fiscal year are expected to exceed 130 trillion yen (approximately 818 billion US dollars). The main driver of this increase is the request for record defense spending of about 8.9 trillion yen.
This figure represents a significant increase compared to the initial budget for the current fiscal year, which was 122.31 trillion yen, and may increase further after the final budget approval at the end of this year.
The Ministry of Defense's list of requests includes the procurement of interceptor drones, the implementation of artificial intelligence in command and control systems, and the further deployment of long-range missiles with 'counterstrike' capabilities.
Additionally, due to Japan's aging population, there is a plan to increase social security expenditures, including pensions and medical services, by approximately 390 billion yen.
Ministries and agencies must submit their budget requests for the 2027 fiscal year, which covers the period from April 2027 to March 2028, by the end of the current month. The Ministry of Finance will finalize the budget by the end of the year.
Notably, the government of Sanae Takaichi has waived spending limits on some priority projects, which is seen as a key factor in the unusually large increase.
With projected tax revenue of about 83 trillion yen for the 2026 fiscal year, budget requests exceeding 130 trillion yen will create a deficit of approximately 50 trillion yen, which will likely require issuing new debt obligations and intensify the strain on Japan's already tight finances.
The rise in government bond yields also increases the burden of the country's debt servicing, further worsening the state finances situation.